Free Motion for Leave to File - District Court of Federal Claims - federal

Case 1:05-cv-00748-CCM

Document 37-4

Filed 03/09/2007

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1044

1 IN THE UNITED STATES COURT OF FEDERAL CLAIMS
2 JADE TRADING, LLC, by and )

4 LAURA KAVANAUGH ERVIN on )

3 th rough ROBERT W. ERVIN AND )

8 v. ) Docket NO.: plaintiffs,) 10
6 partners Other Than the )

5 beha 1 f of ERVIN CAPITAL, LLC, )

7 Tax Matters partner, )

11 UNITED STATES, )

9 )

03-2164T

12 Defendant.) 2306 13 Russell Federal Building 14 courtroom

15 75 1 anta,Street N.W. spring Georgi 16 At Monday, a 17
20 at 9:37 a.m.

18 september 12, adjournment, 2005 19 The parties met, pursuant to
21 BEFORE: HONORABLE MARY ELLEN COSTER WILLIAMS

22 Judge 23 APPEARANCES:
32

24 DAVIDthe pl ai nti ffs: For D. AUGHTRY, Esquire 25
26 LINDA S. PAINE, Esqui re 27 NICOLAS F. KORY, Esqui re

28 chamberl ai n, Hrdl i cka, whi te, wi 11 i ams & Marti n

29 191 peachtree Street, N.E., 9th Floor
30 Atlanta, Georgia 30303-1747

31 (404) 659-1401

1045

1 APPEARANCES: (conti nued)

2 For the Defendant:
3 4 5 6 7

8 Tax Di vi si on

STUART J. BASSIN, Esqui re MATTHEW C. HICKS, Esqui re MICHAEL S. RAUM, Esqui re JENNIFER P. WILSON, Esqu; re U.S. Department of J usti ce

10 washi ngton, D. C. 20044 page 1

9 P.O. BOX 55

Case 1:05-cv-00748-CCM

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11

(202) 307-6542

1046
1
2
3

CON
DIRECT WITNESSES: For the plaintiff:

TENTS
VOIR
CROSS

4
5

REDIRECT

RECROSS DIRE

6
7

Ari Bergmann

8

1068 1183

9

10 11
12 13

1227 1244 1255 1279 1300 1351 1353

1361 1387

1374 1388

1239 1253 1269 1283 1350 1352

1047
1
2
3

EXHIBITS
PLAINTIFF'S IDENTIFIED RECEIVED DESCRIPTION EXHIBITS:
245

4
5

6
7 8

1188

AIG Margi n Account
Statement for Jade
Tradi ng

9

1048
1
2
3

EXHIBITS
DEFENDANT iS

4
5

EXHIBITS:

IDENTIFIED RECEIVED DESCRIPTION

6
7

546

1256
page 2

senti nel presentati on

to investors, 6-16-99

Case 1:05-cv-00748-CCM

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8

548
552

1255

senti nel Advi sors

9

power Po; nt

10 11 12
13 14 15

1238

1249 1254 1351 1360

553
565

1251
1348

46-15-99 memo from Bergmann to Bee 5-5-99 fax from Bergman to Bee

Opi ni on 1 etter from
Bee to Be rgman of 7-

16 17 18 19 20 21 22 23 24 25 26 27 28 29

28-99

566 697 757
763

1350 1344 1317
1067 1067
1303

7 - 20-99 opi ni on 1 ette r
by BDO sei dman L; st of ; nvestors
BDO bi 11 stab 1 e and
bi 11 s

7-26-05 computer

pri ntout, starke

764
765

Decl arati on of Margo L. Stevens Demonstrat; ve, "Terms
of the Knockout"

1049
1
2
3

PROCEEDINGS
(9:37 a.m.)

THE COURT: on the record.
MR. AUGHTRY: Last week we had tendered to

4

5 the Court our excerpts from the sheldon pang
6 deposi t; on, and I was under the ; mpressi on that the

7 included not only our excerpts, but the excerpts
8 desi gnated by the Defendant so we woul d have one

9 compl ete group.

10 Yesterday, I di scovered that the Defendant's
11 excerpts were not in there, and i woul d 1 i ke to tender
12 to the court a copy of what has been given to the

13 court an amended designation by plaintiffs that 14 ; ncorporate both ours and Defendant's.
15

THE COURT: YoU may.
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16 MR. AUGHTRY: Than k you.

17 That's the only preliminary matter for
18 pl ai nti ffs before they move to thei r next wi tness.
19

THE COURT: And for Defendant?
MR. BASSIN: Your Honor, just to complete

20

21 the record on the sheldon pang matter, we would like
22 to tender a copy of our deposi ti on desi gnati ons on

23 sheldon pang that we provided to plaintiffs on
24 september 8. MR. AUGHTRY: And we di d recei ve those and 25

1050
1 hopefull Y have been preci se thi s ti me and

2 i ncorporati ng them.
3

THE COURT: All right. Thank you both.

4 Di d I understand you correctl y to say that
5 you have already incorporated Defendant's desi gnati ons

6 in on place?
7

MR. AUGHTRY: Yes.
THE COURT: Thank you so much. That's

8

9 terrific.
10
MR. AUGHTRY: if there is anythi ng else

11 preliminarily.
12 13

THE COURT: I thi nk we mi ght.
MR. AUGHTRY: pl ease.

14

MR. BASSIN: Your Honor, we have a couple of

15 thi ngs. 16 Fi rst, we wanted to advi se you that the BDO
17 documents under seal issue4 where we have moved to page

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18 unseal the documents, that issue will specifically
19 come up thi s morni ng, okay. 20 THE COURT: I thought that issue was

21 resolved.
12 MR. BASSIN: And our moti on to unseal was

23 granted.
24 THE COURT: NO, I thought that there was no
25 longer any problem with the motion because BDO had no

1051

1 obj ecti on.
2 MR. BASSIN: That's correct. That is
3 correct. We just wanted to make sure that the court

4 had ruled.

5 MR. AUGHTRY: And our only reservation was

6 not preliminary to trial, so we really don't have a

7 dog in that fi ght.
8 THE COURT: I di dn' t thi nk so. okay. 9 MR. BASSIN: okay. second thi ng, and thi s

10 1 s
11 THE COURT: So that motion ls granted.

12 MR. BASSIN: Than k you.

13 The second thi ng, and thi s 1 s somethi ng that
14 i've just had a chance to read the transcri pt from

15 Thursday afternoon from MR. starke's testimony, and at
16 that poi nt the Court expressed, as I understood it,

17 expressed concern that the government had not deal t 18 properly with regard to the documents that were on Mr.
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19 starke's computer, and you had asked for a report on

20 Monday morni ng.
21
22
THE COURT: Asked for a list.

MR. BASSIN: okay. your Honor, I have a

23 couple of things here that i think will help explain
24 it. May I approach? THE COURT: You may. 25

1052
1
2 3

well,
MR.

it's hard to

read.
wi 11
expl ai n

BASSIN:

But I
okay.
okay?

it

to you.

THE COURT:
MR.

4
5

BASSIN:

THE COURT:

YOU have gi ven

a copy of thi s to

6
7

Mr. Aught ry?
MR.

BASSIN:

Yes, we have.

8 Your Honor, it's very important to us that
9 you understand that we have dealt with -- we have

10 dealt forthrightly on this matter. But what we have

11 gone and done is provi ded you wi th two documents thi s

12 morni ng. The fi rst is a pri ntout of the fi 1 e, of the 13 fi 1 e index for Mr. starke's computer 1 i sti ng each of
14 the documents that were on hi s computer rel ated to

15 this issue.
16
17

THE COURT: And when was thi s done?

MR. BASSIN: Thi s was done Fri day morni ng,

18 and it had been done previously, but we repeated the

19 process on Fri day morni ng. 20 THE COURT: And were 6 you able to assure page

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21 yoursel f that these were the same documents that
22 appeared ri ght after hi s deposi ti on?

23 MR. BASSIN: R; ght.
24 THE COURT: And how di d you do that? 25 MR. BASSIN: They went back to the same

1053

1 computer, and pri nted it off.
2 what we had tol d pl ai nti ffs back in August
3 was that we had gone back to Mr. starke's computer and
4 confi rmed that all of the documents on hi s computer
5 had ei ther (a) been produced, or (b) were dupl i cates
6 of documents upon whi ch pri vi 1 ege had already been

7 asserted.
8 what you have in handwri ti ng on the ri ght9 hand si de of the document are two columns of numbers.
10 One is page numbers begi nni ng wi th 107 and 108. okay,

11 those are the Bates numbers that were assi gned to
12 those documents.

13 The second column on the right-hand side
14 that has numbers 42 up through 50 are references to

15 the Margo Stevens decl arati on in the Marri ott case, 16 and we've provi ded you excerpts from that decl arati on.

17 The important thi ng here is that you can ti e
18 each and every page that is on -- that was Mr.
19 starke i s computer to the documents for whi ch pri vi 1 ege

20 was claimed in the Margo Stevens declaration. And I

21 went back and spent and hour and a half yesterday
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22 afternoon repeating that exercise for myself and being

23 sure that that was correct.
24 so the statement that we made on August 2nd
25 to Mr. Aught ry that wi th one excepti on we have

1054

1 determi ned that all of the fi 1 es on Mr. starke's
2 computer were i ncl uded in the Revenue RUl i ng 95-45 3 fi 1 e and were ei ther produced or subj ect to a

4 privilege claim. That statement was correct then and

5 it is correct now.

6 i don't know why the charge was made
7 Thursday afternoon that we had not accounted for the
8 materi a 1 s on Mr. starke's computer. we di d then.

9 we've repeated it now. But there is no basi s for a

10 charge that we have dealt improperly here, and it's 11 important for us to resolve any issues of that to the 12 court iS sati sfacti on.

13 In fact, if the Court so desi res, we can
14 bring the person from the IRS Disclosure and privacy

15 Law secti on who took the stuff off the computer, and 16 prepared thi s index. we can bri ng that person down

17 here. I don't thi nk it i S necessary, but if the Court 18 has any doubts that the government has acted
19 i mproperl y here, we are prepared and wi 11 i ng to do

20 that.
21

THE COURT: It was the wi tness' s testi mony

22 that confused thi ngs, I bel i eve. He sai d that there
23 were five documents and only one had been produced.
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24 NO one was accusi ng anyone of doi ng anythi ng improper.

25 These thi ngs happen. And in fact, there are not fi ve

1055
1 documents on thi s 1 i st. There are more.

2 MR. BASSIN: okay. But in any case , all of
3 the documents on hi s computer have been accounted for.

4 THE COURT: Anything further from the

5 pl ai nti ffs on thi s score?
6 MR. AUGHTRY: Just two points, Your Honor.
7 one, what we were told was that there was
8 on 1 y one document on hi s compute r; that he would go

9 back and check his computer. There is only one

10 document. It was a drafti ng of a rul i ng, and on that
11 we sai d -- it was a phone message or phone

12 conversati on between Mr. Bassi nand mysel f -- that IS

13 fi ne.
14 Now apparently there are a number of

15 documents, and i'll accept Mr. Bassi n' s representati on

16 that he has accurately correlated this to the earlier
17 1 i st. That i s not what we understood, but we now

18 understand it, and we're prepared to move on.

19 THE COURT: very well.
20 MR. BASSIN: YOU r Hono r, one fi na 1

21 cl ari fi cati on. My 1 etter sai d, "wi th one excepti on,
22 we have determi ned that all of the fi 1 es on Mr.
23 starke' s computer were i ncl uded 1 n the fi 1 e, and

24 either produced or subject to a privilege claim."
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25

I have no idea why Mr. Aughtry mi sunderstood

1056
1 that to suggest that there was only one document that
2 we made reference to, but that is a mi sunderstandi ng

3 on pl ai nti ffs' part.
4

MR. AUGHTRY: Had the telephone

5 conversation. if it's a misunderstand, it's a
6 mi sunderstandi ng. we do rai se the questi on as to,
7 gi ven the wi tness 's testi mony, gi ven the producti on of

8 the Helmer/cram memo, why in their waiver of executive

9 privilege as to all these items.
10

MR. BASSIN: we've had that di scussi on
MR. AUGHTRY: NO, I don't believe so.
THE COURT: I haven't ruled on subj ect

11 before, and the Court has rul ed on it.
12 13

14 matter wai ver. It hasn't rea 11 y been presented to me.

15

MR. AUGHTRY: We now have

16
17

THE COURT: Other than in my own mi nd.
MR. AUGHTRY: Right. We now have however

18 many this is, 10 or so -- actually, one, two, three,

19 four, five, six, seven, eight, nine, 10, 11, 12, 13,
20 14 documents from the gentl eman who testi fi ed the

21 other day. 22 YOU wi 11 recall that one of the poi nts of
23 interest was there is a bri efi ng memo, and he was

24 taki ng excerpts from the bri efi ng memo about exi sti ng

25 1 aw, and there appears to be a reference here to chi ef
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1057
1 counsel briefing summary. It seems to me it's all the
2 same subj ect matter, and there is a subj ect matter

3 waiver.
4 THE COURT: whi ch pri vi 1 ege attached here?

5 MR. BASSIN: Executi ve pri vi 1 ege,
6 deliberative process. These are all documents that
7 are preliminary to issuance of a revenue ruling.

8 THE COURT: Not attorney/client privilege?
9 Not work product? There is a di fference in the 1 aw --

10 MR. BASSIN: Ri ght .
11 THE COURT: -- among the privilege, and at

12 least in some jurisdictions the deliberative privilege 13 waiver is limited to the document itself. Not so with

14 attorney/client privilege. I will let you bring other
15 precedent to my attention, but that's my recollection.
16 MR. BASSIN: We can bri ef that. My

17 recollection was that the court's order on executive

18 privilege at one point addressed subject matter 19 wai ver.
20 THE COURT: I have had, unfortunately,

21 several issues regarding subject matter waiver in

22 vari ous cases in the 1 ast coupl e of months, so forgi ve

23 me if I am not recalling this properly.
24 MR. BASSIN: And unfortunately, we have

25 been

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1058
1
2
3

THE COURT:
MR.

On that issue,

yes.

BASSIN:

Yes, we have --

THE COURT:
MR.

Not subj ect matter.
okay.

4
5

BASSIN:

THE COURT:

I

ru 1 ed on that

issue, not
we've

6
7

subj ect matter.
MR.

BASSIN:

okay.

And unfortunately,

8 generated enough di sputes that you have had wri tten

9 enough that i can't remember it all myself. okay.

10 THE COURT: i'm gl ad you i re the one that

11 sai d that.
12 MR. BASSIN: okay, Your Honor.
13 THE COURT: what's your pleasure? DO you 14 want to see if my reco 11 ecti on of the 1 aw in thi s

15 ci rcui tis correct on the scope of a subj ect matter
16 waiver in the context of the deliberative process 17 pri vi 1 ege? And if it's 1 i mi ted to one document, we're

18 done. And if it's not, then we can look at them. 19 MR. BASSIN: And if you recall, YOU r Hono r ,
20 the "Helmer document" was the product of an

21 inadvertent disclosure in another matter. 22 THE COURT: NO, it was -- was it

23 inadvertent? 24 MR. BASSIN: Yes.
25 THE COURT: It was i nadve rtent . okay.

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1059

1 MR. BASSIN: okay. But those ki nd of

2 internal deliberations are exactly the kind of thing
3 for which we always claim deliberative process. The
4 prob 1 em was that the fi rst 10 pages of the document

5 were pretty innocuous reci tati ons of cases, and what 6 happened was that somebody di dn' t read far enough into

7 the document in that case to see that there was some

8 truly deliberatively stuff further in.
9 Your Honor, the other issue

10 MR. AUGHTRY: Excuse me.

11 THE COURT: But it's only the deliberative
12 process privilege that's been claimed for that
13 document.

14 MR. BASSIN: we have to go back and look.

15 we'd have to go back and look at it.
16 MR. AUGHTRY: Your Honor, this lS a 17 si gni fi cant case for us. we don't want to pass on any

18 available evidence. we will look at it over the 19 eveni ng .

20 i will tell you from our perspective we feel
21 like we have made our point that in '95, Helmer was

22 focused, Helmer was accepted as favoring the

23 government, and not altered until 2003. we will look
24 at it over the evening, but we're not waiving the -- i

25 don't want to wai ve the ri ghts to any documents that

1060
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